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H. 3831
STATUS INFORMATION
General Bill
Sponsors: Rep. Thompson
Document Path: l:\council\bills\ggs\22828mm07.doc
Introduced in the House on April 10, 2007
Currently residing in the House Committee on Labor, Commerce and Industry
Summary: Deferred presentment transactions
HISTORY OF LEGISLATIVE ACTIONS
Date Body Action Description with journal page number
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4/10/2007 House Introduced and read first time HJ-10
4/10/2007 House Referred to Committee on Labor, Commerce and Industry
HJ-11
View the latest legislative information at the LPITS web site
VERSIONS OF THIS BILL
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 34-39-185 SO AS TO PROVIDE FOR THE DEVELOPMENT, IMPLEMENTATION, AND MAINTENANCE OF A STATEWIDE DATABASE OF DEFERRED PRESENTMENT TRANSACTIONS ACCESSIBLE TO DEFERRED PRESENTMENT LICENSEES FOR THE PURPOSE OF TRACKING OPEN AND CLOSED TRANSACTIONS WITH OTHER LICENSEES AND ACCESSIBLE TO THE BOARD OF FINANCIAL INSTITUTIONS FOR THE PURPOSES OF INVESTIGATION AND ENFORCEMENT; TO AMEND SECTION 34-39-180, RELATING TO RESTRICTIONS AND REQUIREMENTS FOR A DEFERRED PRESENTMENT TRANSACTION, SO AS TO LIMIT A LICENSEE TO A MAXIMUM LOAN AMOUNT FOR ANY ONE CUSTOMER OF THREE HUNDRED DOLLARS DURING ANY SIXTY-DAY PERIOD, TO LIMIT THE NUMBER OF TRANSACTIONS IN A YEAR TO SIX FOR ANY ONE CUSTOMER, AND TO REQUIRE A LICENSEE TO GRANT A SIX-MONTH REPAYMENT GRACE PERIOD AND A REPAYMENT PLAN OPTION TO A CUSTOMER; TO AMEND SECTION 34-39-230, RELATING TO PENALTIES AND REMEDIES FOR VIOLATIONS BY A DEFERRED PRESENTMENT LICENSEE, SO AS TO REQUIRE THE BOARD TO IMPOSE CERTAIN CIVIL PENALTIES, TO PROVIDE THAT VIOLATIONS RUN WITH THE LICENSEE, OR THE PERSON SUBJECT TO THE LICENSING REQUIREMENT, AND NOT WITH THE LOCATION, TO PROVIDE FOR CUMULATIVE CIVIL REMEDIES, INCLUDING INJUNCTIVE RELIEF, DAMAGES AND ATTORNEY'S FEES, UNFAIR TRADE PRACTICE REMEDIES, AND VOIDING OF THE CONTRACT, AND TO PROHIBIT THE ENFORCEMENT OF AN ARBITRATION CLAUSE IF A COURT FINDS THAT SPECIFIED CIRCUMSTANCES RENDER THE CONTRACT UNCONSCIONABLE.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Chapter 39 of Title 34 is amended by adding:
"Section 34-39-185. (A) By December 31, 2008, the board shall develop, implement, and maintain a statewide, common database that has real-time access through an Internet connection, is accessible at all times to licensees, and to the board for purposes of subsections (K) and (L), and meets the other requirements of this section. Before the board determines that the database is fully operational for the purposes of this chapter, for at least thirty days the database provider shall operate a pilot program of the database to test all of the processes of the database. The database provider may make the pilot program available to all applicants and licensees. During the thirty-day period that begins on the date the board determines that the database is fully operational, the board shall not approve the imposition of database verification fees or allow licensees to charge a transaction fee.
(B) The board may operate the database described in subsection (A) or may select and contract with a single third party provider to operate the database. If the board contracts with a third party provider for the operation of the database, all of the following apply:
(1) The board shall ensure that the third party provider selected as the database provider operates the database pursuant to the provisions of this chapter.
(2) The board shall consider cost of service and ability to meet all the requirements of this section in selecting a third party provider as the database provider.
(3) In selecting a third party provider to act as the database provider, the board shall give strong consideration to the third party provider's ability to prevent fraud, abuse, and other unlawful activity associated with deferred presentment service transactions and provide additional tools for the administration and enforcement of this chapter.
(4) The third party provider shall use the data collected pursuant to this chapter only as prescribed in this chapter and the contract with the board and for no other purpose.
(5) If the third party provider violates this chapter, the board shall terminate the contract and the third party provider is barred from becoming a party to other state contracts.
(6) A person injured by the third party provider's violation of this chapter may maintain a civil cause of action against the third party provider and may recover actual damages plus reasonable attorney's fees.
(C) The database described in subsection (A) must allow a licensee accessing the database to do all of the following:
(1) verify whether a customer has an open deferred presentment service transaction with a licensee;
(2) provide information necessary to ensure licensee compliance with requirements imposed by the Federal Office of Foreign Asset Control under federal law; and
(3) track and monitor the number of customers who notify a licensee of violations of this chapter, the number of times a licensee agreed that a violation occurred, the number of times that a licensee did not agree that a violation occurred, the amount of restitution paid, and other information the board requires by rule. (D) While operating the database, the database provider shall do all of the following:
(1) establish and maintain a process for responding to transaction verification requests due to technical difficulties occurring with the database that prevent a licensee from accessing the database through the Internet;
(2) comply with all applicable provisions of the South Carolina Family Privacy Act in Chapter 2 of Title 30;
(3) comply with all applicable provisions of federal and state laws regarding identity theft and financial identity fraud;
(4) provide accurate and secure receipt, transmission, and storage of customer data; and
(5) meet the requirements of this chapter.
(E) When the database provider receives notification that a deferred presentment service transaction is closed pursuant to subsection (F) of this section, the database provider shall designate the transaction as closed in the database immediately, but in no event after 11:59 p.m. on the day the board or database provider receives notification.
(F) The database provider may not designate a deferred presentment service transaction as closed in the database until a licensee reports to the database provider that the transaction is closed. If the deferred presentment service transaction remains open five days after the due date, the licensee must notify the database provider that the following has delayed the closing of the transaction:
(1) the customer failed to make payment;
(2) the transaction is open because the customer's check or an electronic redeposit is in the process of clearing the banking system;
(3) the customer has opted to make payments under the licensee's payment plan;
(4) the transaction remains open because the customer's check is being returned to the licensee for insufficient funds, a closed account, or a stop payment order; or
(5) other factors determined by the board.
(G) If a licensee stops providing deferred presentment service transactions, the database provider shall designate all open transactions with that licensee as closed in the database sixty days after the date the licensee stops offering deferred presentment service transactions, unless the licensee reports to the database provider before the expiration of the sixty-day period which of its transactions remain open and the specific reason each transaction remains open. The licensee also shall provide to the board a reasonably acceptable plan that outlines how the licensee plans to continue to update the database after it stops offering deferred presentment service transactions. The board promptly shall approve or disapprove the plan and immediately notify the licensee of its decision. If the plan is disapproved, the licensee may submit a new plan or may submit a modified plan for the licensee to follow. If the board reasonably determines that a licensee that has stopped offering deferred presentment service transactions is not updating the database in accordance with its approved plan, the board immediately shall close or instruct the database provider immediately to close all remaining open transactions of that licensee.
(H) The response to an inquiry to the database provider by a licensee shall state only that a person is eligible or ineligible for a new deferred presentment service transaction and describe the reason for that determination. Only the person seeking the transaction may make a direct inquiry to the database provider to request a more detailed explanation of a particular transaction that was the basis for the ineligibility determination. Information regarding a person's transactional history is confidential, is not subject to public inspection, is not a public record subject to the disclosure requirements of the Freedom of Information Act, is not subject to discovery, subpoena, or other compulsory process, and must not be disclosed to a person other than the board.
(I) The database provider may charge a licensee a verification fee for access to the database. A licensee may charge a customer a one-dollar fee for each transaction to cover the cost of the verification fee paid to the database provider.
(J) The board may access the database provided pursuant to subsection (A) only for purposes of an investigation of, examination of, or enforcement action concerning an individual database provider, licensee, customer, or other person. The board and employees of the board, the office, or this State may not obtain or access a customer's social security number, driver's license number, or other state-issued identification number in the database except as provided in this subsection. An individual who violates this subsection is guilty of a misdemeanor punishable by imprisonment for not more than ninety days or a fine of not more than one thousand dollars, or both, if convicted, and an individual who violates this subsection must be dismissed from office or discharged from employment.
(K) The board shall investigate violations of and enforce this section. The board may not delegate its responsibilities under this subsection to a third party provider.
(L) The board shall require by rule that:
(1) data are retained in the database only as required to ensure licensee compliance with this chapter;
(2) data in the database concerning a customer transaction are archived within three hundred sixty five days after the customer transaction is closed unless needed for a pending enforcement action;
(3) identifying customer information be deleted from the database when data are archived; and
(4) data in the database concerning a customer transaction are deleted three years after the customer transaction is closed or any enforcement action pending three years after the customer transaction is completed, whichever is later.
(M) The board may maintain access to data archived pursuant to subsection (L) for future legislative or policy review."
SECTION 2. Section 34-39-180(B) of the 1976 Code, as added by Act 433 of 1998, is amended to read:
"(B) The face amount of a check taken for deferred presentment or deposit may not exceed three hundred dollars, exclusive of the fees allowed in Section 34-39-180(E). A licensee may not accept a check from a customer or engage in a transaction with a customer for deferred presentment or deposit that exceeds three hundred dollars, exclusive of the fees allowed in Section 34-39-180(E), during a time period of sixty days. This subsection expressly prohibits more than one loan or loans that exceed the three hundred-dollar maximum amount during any one-time period of sixty days. In addition, a licensee may not provide deferred presentment services more than six times each year for each customer."
SECTION 3. Section 34-39-180 of the 1976 Code, as added by Act 433 of 1998, is amended by adding at the end:
"(H) A licensee must provide a repayment plan option if a customer notifies the licensee that he is unable to repay the loan when the loan is due. The customer must agree to a repayment plan and must make reasonable attempts to repay the loan within the specified period. The licensee must grant up to a six-month grace period after the original termination date, without additional charge."
SECTION 4. Section 34-39-230 of the 1976 Code, as added by Act 433 of 1998, is amended to read:
"Section 34-39-230. (A) The board may must order and impose civil penalties upon a person subject to the provisions of this chapter for violations of this chapter or its regulations in an amount not to exceed one thousand dollars for each violation. For the first violation of this chapter, the board must fine the person two thousand five hundred dollars for each location operating in this State regardless of whether each location violated this chapter. For the second violation of this chapter, the board must revoke the license of the licensee for two years. The board also may order repayment of unlawful or excessive fees charged to customers.
(B) A violation of this chapter runs with the licensee, as defined in this chapter, or unlicensed person subject to this chapter, not an individual location of the licensee or unlicensed person subject to this chapter.
(C) The remedies provided in this chapter are cumulative and apply to a licensee and to an unlicensed person to whom this chapter applies and who failed to obtain a license.
(1) A violation of state law prohibiting unfair or deceptive trade practice arising out of a deferred presentment transaction is a violation of this chapter.
(2) A violation of this chapter is a violation of a state law prohibiting unfair or deceptive trade practices.
(3) The violation of a provision of this chapter, or regulation promulgated pursuant to it, except as the result of accidental or bona fide error of computation, renders the loan void ab initio, and the person may not collect, receive, or retain any principal, interest, or other charges with respect to the loan.
(4) A person found to have violated this chapter is liable to the customer for actual, consequential, and punitive damages, statutory damages of one thousand dollars for each violation, and costs and attorney's fees. In determining attorney's fees, the amount of the recovery on behalf of the debtor is not controlling.
(5) A customer may sue for injunctive and other appropriate equitable relief to stop a person from violating a provision of this chapter.
(D) An arbitration clause in a deferred presentment loan contract is not enforceable if the contract is unconscionable. In determining if the contract is unconscionable, the court shall consider the circumstances of the transaction as a whole including, but not limited to:
(1) the relative bargaining power of the parties;
(2) whether arbitration is prohibitively expensive to the customer in view of the amounts in controversy;
(3) whether the contract restricts or excludes damages or remedies that would be available to the customer in court, including the right to participate in a class action;
(4) whether the arbitration would take place outside the county in which the licensee is located or another place that is unduly inconvenient or expensive for the customer in view of the amounts in controversy; and
(5) any other circumstances that render the contract oppressive."
SECTION 5. This act takes effect upon approval by the Governor.
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